Nestle India looks to enter new categories

Nestlé India CMD Suresh Narayanan. Photo: Ramesh Pathania/Mint

Nestlé India CMD Suresh Narayanan. Photo: Ramesh Pathania/Mint

Nestlé India Ltd, the local unit of the world’s largest food company, is evaluating five new segments that it may enter over the next few quarters.

The move is part of the company’s plan to reduce its dependence on Maggi noodles and get its existing portfolio of products back on the growth path, Suresh Narayanan, chairman and managing director, Nestlé India, said on Tuesday.

“We are evaluating five categories—Nespresso (a coffee machine), Dolce Gusto (a coffee capsule system), pet care, cereal and skin care. We have recently entered the healthcare segment. However, we are yet to finalize which ones to start with,” Narayanan said, adding that, globally, Nestlé has around 20,000 brands, while the company sells just about 20 in India.

Nestlé, which entered India in 1912, turned into a “demolished house”, as Narayanan put it, after its single largest revenue earner, Maggi, faced a ban in June 2015. Nestlé could not sell Maggi, which accounted for 30% of the firm’s revenue in 2014, for six months after the Food Safety and Standards Authority of India (FSSAI) ordered the company to withdraw the instant noodles.

The FSSAI order, which was overturned by the Bombay high court in August 2015, was based on allegations that Maggi noodles contained monosodium glutamate, and lead in excess of prescribed limits.

“There were ripple effects across portfolios. We took a hit in milk and nutrition, coffee and beverages, chocolates, et al. What we are trying to do is to catch back on not just Maggi but the collateral damages that took place in the rest of the portfolio. That’s why we still see little bit of trailing effect. It’s like reconstructing a demolished house, not reconstructing a house where one door and one window have been broken,” said Narayanan, who was sent to India immediately after FSSAI declared the ban to tackle the crisis.

Narayanan got Maggi back to retail shelves on 9 November 2015. “It is exactly one year. Maggi has come back to the market leader position with more than 58% share. It was clinically dead in September 2015. But we are yet to reach the level before the crisis. On the other hand, the category has also shrunk. Besides rebuilding Maggi, we need to rebuild the category,” said Narayanan, adding, “the name Nestlé was dented due to the unfortunate Maggi issue”.

In calendar year 2014, Nestlé India had revenue of Rs9,854.84 crore. The company’s total revenue is still much below what it was before the ban. In the quarter ended 30 September, it reported revenue of Rs2,190.2 crore. It was Rs2,332.6 crore in quarter ended 31 March 2015 (the quarter before the Maggi ban).

“Things are changing. Backed by new launches (25-30 products in the past few months) coupled with renewed focus in larger cities, chocolates and confectionery have already come back to growth. Coffee and beverages are turning back to growth. But milk and nutrition are still under pressure. We are taking measures to get these back to growth. The desire is to get back to double-digit growth as soon possible,” Narayanan said.

The company has already started bringing out new milk products. “There is pricing pressure in milk. We are not into the discounting game. Rather, we’ll bring more differentiated and innovative products, (shift of focus from dry milk to liquid). We have to make certain trade-offs between value, volume and profitability,” he added.

According to Narayanan, the boards of Nestlé India and Nestlé SA, have agreed that there was a need to “accelerate the game in India”, which will require fresh investments in the existing portfolio, new products, renovation and innovation, with a quest to double revenue in India within four to five years.

Analysts had last year indicated that Nestlé may bring in new products from its global portfolio as the company had been looking to reduce dependence on Maggi noodles.

“Nestlé India could look at bringing in products in pet care, water and ice-cream,” Abneesh Roy, an analyst with Edelweiss Securities, had said in a note in August 2015.

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